Source: Robin Roth, Senior Contracts Editor, Conferon, Inc.
E-Specs: June 24, 2002

Remember the first time you came across an indemnification clause in a facility contract? You probably skipped over it quickly. Indemnification clauses can contain the most intimidating-looking text in a contract, but understanding some basic principles can focus these clauses for you more intelligibly.

The word "indemnify" comes from the Latin word indemnis, meaning "unharmed." Indemnification is the function of insurance companies: to secure against injury, loss or damage and to compensate for such incurred harm. You are indemnified by your insurance company for damage to your house in the event of a fire. Likewise, in a hotel contract, the hotel and group may indemnify each other for harm that was not the fault of the one being held responsible. If an attendee falls and is injured on a wet floor, the hotel and group are likely to be sued. If the indemnification clause holds each party responsible for its own actions and negligence, the hotel will pay for the group’s defense and pay any damages against the group.

Indemnification in hotel contracts is advantageous for a group. Since a meeting takes place on hotel property, the hotel is more likely to do things wrong, but both the hotel and group are likely to be named in a law suit. There are fewer potential calamities that the group could be responsible for. Being indemnified by the hotel provides the group with attorneys’ fees and coverage beyond the limits of its insurance policy. If an attendee sues the hotel and group and it is eventually judged that the hotel is at fault, the group still pays the costs to defend itself if there’s no indemnification.

Here are some terms to watch for in hotel contract indemnification clauses:

• Yes - A reciprocal clause is desirable where each party indemnifies the other for (is responsible for) its own negligence (mutual indemnification).
• No - A party should not be held responsible for the negligence of the other party. This can be hidden in vague terms. For example, if indemnification is given by "either party" for the negligence of "either party," you could read this to mean that the group indemnifies the hotel for the hotel’s negligence. The second "either party" would be more clearly stated as the "indemnifying party."
• Yes - What each party is being asked to be responsible for is within its control.
• No - Beware of "sole," as in "sole negligence." This restriction would limit liability and make it harder for indemnification to kick in. Only one party would have be at fault, whereas removing "sole" distributes liability among the parties according to percentage of fault.
• Yes - The word "defend" is in the clause. This ensures that the negligent party pays for the defense from the outset rather than a reimbursement provided after the judgment has been made.
• No - Beware that the clause does not cover only up to the limits of the group’s insurance. This may negate the whole clause, since indemnification is intended for coverage over and above a party’s insurance limits.

(Note: This information is not intended to be "legal advice." A qualified attorney should be consulted to review all contract issues.)